Walgreen's August Sales Rise

Walgreen (WAG - Analyst Report) has reported a strong 7.8% year-over-year rise in August sales to $6.10 billion. Total front-end sales increased 6.8% with a 4.8% rise in comparable store front-end sales.  The company noted that hurricane Irene had no significant impact on sales.

Prescriptions filled at comparable stores increased 5.2% in August. Calendar day shifts in August 2011 resulted in one additional Wednesday and one less Sunday compared to the year-ago period. This benefited prescriptions filled in comparable stores by 2.2 percentage points.

Pharmacy sales, accounting for 65.9% of total sales in August, increased 7.6% with a 6.1% rise in comparable pharmacy sales. Comparable pharmacy sales witnessed a positive impact of 2.2 percentage points while introduction of generics in the last 12 months had a negative impact of 1.7 percentage points. More than 300,000 flu shots were administered during the season-till-date at pharmacies and clinics.

Walgreen recorded sales of $17.94 billion during the fourth quarter of fiscal 2011, up 6.4% compared to the year-ago quarter. Comparable store sales for the quarter increased 4.3%, while front-end comparable store sales were up by 4.7%.

Total sales for fiscal 2011 (ending August 2011) increased 7% to $72.16 billion with a 3.3% rise in comparable store sales. At the end of August 2011, Walgreen operated 8,211 locations in all 50 states, the District of Columbia, Puerto Rico and Guam.

Over the past several years, Walgreen has been taking a number of steps to align its assets with core strategies. These include the acquisition of Cardinal Health’s (CAH - Analyst Report) Specialty Pharmacy business and agreement with Omnicare (OCR - Snapshot Report) to divest its long-term care pharmacy business in exchange of the latter’s home infusion business.

Thereafter, during the third quarter of fiscal 2011, Walgreen sold its Pharmacy Benefit Management business to Catalyst Health (CHSI - Analyst Report) for $525 million. By divesting its non-core assets, Walgreen will be able to better focus on its drug stores. On the other hand, the company acquired online retailer drugstore.com to gain a strong foothold in the online arena as it will be able to access more than 3 million online customers.

We currently have a Neutral recommendation on Walgreen, which also corresponds to a Zacks #3 Rank (Hold) in the short term.

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